Last week, our Los Angeles cannabis attorneys were at the City Council meeting where the Council moved to amend the Draft Regulations that were previously released on September 22, 2017. The Los Angeles City Council moved to amend the Draft Regulations released on 9-22-2017 to include a motion that will allow cannabis operators who meet certain requirements to remain open if they file for limited immunity within 15 days of applications opening. You can read more about the Draft Regulations from September in our previous posts here and here.
If you have been looking into protecting your cannabusiness' intellectual property, you may have heard the term “trade dress” tossed around. Trade dress is a legal term for the visual components, design/shape, and packaging of a product. It encompasses the “bells & whistles,” so to speak, and is generally intended to protect the overall visual appearance of a product, minus any elements that are functional. The name comes from its historical origins, i.e., how a product is “dressed up.” And even though trade dress is a commonly forgotten right, it is actually quite important when it comes to cannabis law.
Trade dress protection has been extended to everything from restaurant “atmospheres” (Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763 (1992); Fuddruckers, Inc. v. Doc’s B.R. Others, Inc., 826 F.2d 837, 843 (1987)) to the unique setting of a golf course’s “signature hole.” (Pebble Beach Co. v. Tour 18 I, Ltd., 942 F.Supp. 1513 (S.D.Tex. 1996)). The gist of it is the “dressing” must be distinctive enough that consumers identify the source of your product by looking at its total appearance and packaging.
So can cannabusiness owners get trade dress protection? As with many questions in marijuana law, the answer is yes and no.
Just as with a trademark, you have common law rights to your trade dress that you can assert in bringing a lawsuit against infringers that pass off their products as yours. The basis is section 43(a) of the Lanham Act, which establishes civil liability for false designations of origin. However, trade dress owners asserting common law rights in court have the additional burden of showing that the “dressing” serves a non-functional purpose. For this reason (as well as the statutory damages established in the Lanham Act) it is preferable to obtain trade dress registration beforehand wherever possible.
Here we run into the same issues as with trademark: CSA-based rejections. The USPTO has caught on to the emerging cannabis industry, and currently has four trademark examining attorneys that that look at all of the cannabis-based applications coming in. There are many ways around a CSA refusal, and many of the strategies we have discussed for trademarks apply here as well.
If you are thinking of trade dress protection already, then good news – you’re already ahead of the game. Speak with our cannabis law attorneys when you’re ready to take the next step!
This weekend was the second annual The Edibles List Infused Expo in DTLA. As LA Cannabis lawyers, our firm is tracking the City's development of regulations and also California's. This weekend, the focus was on edibles.
Maybe you’ve heard about a bill going around the California Senate right now that would create a state trademark registration system for cannabis. That’s right, Assembly Bill No. 64 for “Cannabis: Licensure and Regulation” was introduced on December 12, 2016 by Assembly Members Rob Bonta (Dist. 18 - Oakland), Ken Cooley (Dist. 8- Sacramento), Reggie Jones-Sawyer (Dist. 59 - LA), Tom Lackey (Dist. 36 – LA/Kern) and Jim Wood (Dist. 2 – Humboldt-Mendocino). On June 1, 2016, the bill passed through the Assembly with 71 Aye votes and just one Nay (Travis Allen, Dist. 72-Orange Co.).
The bill has been amended four times already, and has bounced around several committees in the State Senate. Recently, it arrived before Appropriations Committee, where it currently sits being “held under submission.” That means it could still be a while before the bill makes it to a final version (or survives at all). As recently as September 1, it cleared the suspense file, where bills that cost the public more than $150,000 in a single fiscal year are often sent. Before that, AB-64 had already made it through the Committees on Public Safety and Business Professions and Economic Development. Appropriations has estimated a fiscal impact of one-time costs of $50,000 to taxpayers and $90,000 per year for the Secretary State’s Office to process trademark applications for cannabis products.
According to the authors of the bill, its purpose is “to address a series of policy and technical changes that remain following the passage of SB 94. Each of these issues are of critical importance to stakeholders in the cannabis space… [including] preserving intellectual property[.]” Assemblyman Bonta and his co-sponsors acknowledge the current situation and emphasize the importance of establishing a process by which cannabusiness owners can register their trademarks (in California, at least). The Senate Committee on Business Professions and Economic Development recognizes this as well, commenting that “Medical cannabis businesses have been developing innovative brands, but are unable to protect their intellectual property with trademarks because cannabis is prohibited by federal law. AB 64 allows the Secretary of State to issue state trademarks for cannabis and cannabis products.”
Here’s the relevant section of the California bill on cannabis trademarks as it currently stands:
(4) Existing law, the Model State Trademark Law, provides for the registration of trademarks and service marks with the Secretary of State and requires the classification of goods and services for those purposes to conform to the classifications adopted by the United States Patent and Trademark Office.
This bill, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, would, notwithstanding those provisions, authorize the use of specified classifications for marks related to medical cannabis and nonmedical cannabis cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California.
Section 14235.5 is added to the Business and Professions Code, to read:
(a) Notwithstanding Section 14235, for purposes of marks for which a certificate of registration is issued on or after January 1, 2018, the following classifications may be used for marks related to medical cannabis and nonmedical cannabis cannabis, including medicinal cannabis, goods and services that are lawfully in commerce under state law in the State of California:
(1) 500 for goods that are medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products. cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
(2) 501 for services related to medical cannabis, medical cannabis products, nonmedical cannabis, or nonmedical cannabis products. cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
(b) For purposes of this section, the following terms have the following meanings:
(1)“Medical cannabis” and “medical cannabis products” have the meanings provided in Section 19300.5.
(2)“Nonmedical cannabis” and “nonmedical section, “cannabis,” “cannabis products,” medicinal cannabis,” and “medicinal cannabis products” have the meanings provided for “marijuana” and “marijuana products,” respectively, in Section 26001.
As you can see, the language has already been revised several times, and will likely undergo more changes before the bill reaches its final form – so stay tuned. In the meantime, contact us or consult our guide to California cannabis law for more information.
The short answer is yes, for now. Until the law changes, you need to operate as a nonprofit. You should also prepare yourself for for-profit operation so that your business is not caught off guard when the law does change. There is a great deal of misinformation and misunderstanding about how cannabis businesses are allowed to be organized in California. California Health & Safety Code § 11362.765 is the law of the land, stating in part: “nor shall anything in this section authorize any individual or group to cultivate or distribute cannabis for profit.” Note that this section was not repealed or replaced by any provisions in SB 94 (our Guide to SB94 is available here). Appellate decisions have interpreted this language to mean that all cannabis cultivation and distribution in the state is required to be conducted on a non-profit basis, and that anyone cultivating or distributing cannabis “for profit" is subject to criminal sanctions (currently a misdemeanor in most cases, with potential jail time and fines).
Now that California is set to give licenses to cannabis operators, you may be wondering -- can cannabis companies get trademarks yet? The answer is more complicated than you may expect.
Your instincts are right; it’s time to start planning for the future. And to do that, you need to develop a brand that you can protect and your consumers can depend upon.
Yet the U.S. Patent and Trademark Office has expressly, and repeatedly, affirmed that that it will deny registration of any “marijuana” or “cannabis” related goods or services. You can read that decision here. The basis for this policy is the Controlled Substances Act; so long as the sale of marijuana is classified as federally illegal, the USPTO considers the use of such marks in commerce as “not lawful” and thus not entitled to protection. Proposition 64 and California’s medical marijuana laws, as changes in state law, do not affect the Board’s policy regarding federal registration. That means that properly licensed cannabis companies that sell cannabis-related goods and services in 100% compliance with California law are still not engaging in a “lawful” use in commerce according to the USPTO. Cannabis companies seeking protection from California run into the same problem as Sacramento has decided to follow the USPTO’s policy.
However, there are still ways for a cannabusiness owner to protect their intellectual property assets. One emerging strategy is to trademark a number of other goods and services that use your mark, but do not use or primarily facilitate use of the federally banned substance itself. These types of goods can range from t-shirts to oils – anything that does not constitute “drug paraphernalia” that “is primarily intended or designed for use in manufacturing, compounding, converting, concealing, producing, processing, preparing, injecting, ingesting, inhaling, or otherwise introducing into the human body a controlled substance, possession of which is unlawful under the CSA.” Registering trademarks for these ancillary goods and services puts the owner in a better strategic position for the future; when federal restrictions finally lift, the owner will have a strong claim to the mark as residing in their “natural zone of expansion.” This tactic puts the trademark owner on the offensive, putting any would-be pirates and infringers on notice.
There is reason to keep an eye on the California Legislature, too. Soon enough, owners may be able to use the state trademark registration process. Though state trademarks will not convey national-level protection, they will cover the state of California. Recently, the California Legislature has considered adding statutory language in AB-64 that would provide new trademark classes in California for:
- (500): for goods that are cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
- (501): for services related to cannabis or cannabis products, including medicinal cannabis or medicinal cannabis products.
We are doing a series of posts on cannabis trademarks and cannabis IP. Check back for more next week.
This past Monday, the Los Angeles City Council held an open meeting of its Rules, Elections, and Intergovernmental Relations Committee on the subject of the city’s cannabis regulations. Our LA cannabis lawyers were present to comment on the new draft and urge the City to take a reasonable, fair, and business-oriented approach to regulation. To the disappointment of many of Los Angeles' cannabis stakeholders, the city has not yet drafted its final cannabis ordinance, and has yet to even set a date for the completion of said ordinance. Though under Measure M this was supposed to pass by September 30, that deadline is about to come and go.
As the LA Times reported, the current situation and the new draft regulations leave the city’s existing marijuana businesses (particularly existing cultivators and manufacturers) in a precarious situation. Without a clear path toward legally sanctioned operations under the new cannabis ordinance, their businesses could be forced to shut down to avoid violating the law. Beyond the obvious financial hardship, inconvenience, and legal risk, this unclear state of affairs for marijuana activity presents a business hazard: With real estate prices in Los Angeles at record levels, a property that’s zoned for cannabis activity, but not allowed to operate, can quickly become a white elephant with overhead expenses large enough to drive its owner out of business.
Council members responded to the concerns of those in attendance, saying that, although they had not made an official recommendation to the city on how to proceed, they hoped to find a solution that satisfied the existing industry’s needs. Politically, the situation is a difficult one: While it makes sense to give marijuana operators priority in licensing commensurate with their compliance with previous laws, detractors argue that this could be interpreted as rewarding grey-market or outright illegal activity. Either way, some constituents are bound to be unhappy. Moreover, the situation is characterized by pervasive uncertainty: this regulation is still a draft, and there could be still more changes on the way before a final ordinance is passed.
For Los Angeles to pave the way for a sustainable legal cannabis industry, the council members will have to respond to these concerns – and do so quickly, before the uncertainty of the current situation takes its toll on existing cannabis businesses.